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Fears and Risks in Investments
- By Budgeting Help
- Published 08/10/2007
- Investments
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Fears and Risks in Investments
You may have numerous fears related to starting out in the investment world. Some may be unfounded and simply related to you venturing into the unknown and starting a new task. First-time investorts should be aware that some strategies, tips and tools you find in your path to investment may actually be risky and only lead you to losses.
Isn’t this risky?
All investments, regardless of asset class, carry some level of risk. At the same time, it is the only way to develop wealth and residual income for which you do not have to work. Those who have started investing understand this, and see it as enough of a reward to take the risk.
Keep in mind there are certain levels of risk tolerance. Some people are biologically “hard-wired” to tolerate risk at greater levels than others. However, your risk tolerance may be lower since you have never invested before.
Select investment and diversification styles that fit your current risk tolerance. If you unsure which direction to go as you begin, start with a simple strategy (see the budgeting-help.com article on “Simple Diversification Strategies”). Then, over time, you can use more complex strategies to put your investment capital in more markets and more asset classes.
Isn’t the current market too high to start now?
You may think that recent, unexpected growth is making stocks, bonds, or funds too high to buy. But, because the market fluctuates often, you may have to deal with interim losses. By starting now, you may also catch the next wave of growth.
Overall, if you are investing for the long-term, and not trying too hard to time the market (at least while you’re a beginner), you will likely see the growth that you had originally planned when you started.
Can I get greater returns by timing the market?
Numerous money managers and experts agree that attempting to time the market, and buy and sell individual shares accordingly increases the chance for losses. It has been shown by Nobel prize winning economist William Sharpe that an individual investor must be correct 3 out 4 times to obtain the same returns as an investor who buys and holds his or her shares.
Keep in mind that no investments are insured are guaranteed, and there are no strategies that will always ensure returns on investment. Additionally, everyone has a certain level of risk tolerance that will affect their decision making. If you are unsure, you can talk to investment professionals for advice on your investment goals.
References
Richard Jenkins. Start Investing With $100
Hemant Rustagi. Five Fears Of A First Time Investor
Chris Arnold. Your Money
Isn’t this risky?
All investments, regardless of asset class, carry some level of risk. At the same time, it is the only way to develop wealth and residual income for which you do not have to work. Those who have started investing understand this, and see it as enough of a reward to take the risk.
Keep in mind there are certain levels of risk tolerance. Some people are biologically “hard-wired” to tolerate risk at greater levels than others. However, your risk tolerance may be lower since you have never invested before.
Select investment and diversification styles that fit your current risk tolerance. If you unsure which direction to go as you begin, start with a simple strategy (see the budgeting-help.com article on “Simple Diversification Strategies”). Then, over time, you can use more complex strategies to put your investment capital in more markets and more asset classes.
Isn’t the current market too high to start now?
You may think that recent, unexpected growth is making stocks, bonds, or funds too high to buy. But, because the market fluctuates often, you may have to deal with interim losses. By starting now, you may also catch the next wave of growth.
Overall, if you are investing for the long-term, and not trying too hard to time the market (at least while you’re a beginner), you will likely see the growth that you had originally planned when you started.
Can I get greater returns by timing the market?
Numerous money managers and experts agree that attempting to time the market, and buy and sell individual shares accordingly increases the chance for losses. It has been shown by Nobel prize winning economist William Sharpe that an individual investor must be correct 3 out 4 times to obtain the same returns as an investor who buys and holds his or her shares.
Keep in mind that no investments are insured are guaranteed, and there are no strategies that will always ensure returns on investment. Additionally, everyone has a certain level of risk tolerance that will affect their decision making. If you are unsure, you can talk to investment professionals for advice on your investment goals.
References
Richard Jenkins. Start Investing With $100
Hemant Rustagi. Five Fears Of A First Time Investor
Chris Arnold. Your Money